Last week saw the first ever issuance of a Sustainability-Linked Bond (SLB) from an emerging market issuer. Brazilian pulp & paper producer Suzano issued US$750 million of Jan-2031 bonds at a yield of 3.95%. The bond coupon (3.75%) is subject to a sustainability performance target and shall increase by 25bps per annum from July 2026, if the issuer does not meet its target in 2025. It is different to a green bond. Green bond proceeds have to be used for environmentally-friendly projects. Sustainability-linked bonds can see their proceeds used for general corporate purposes.

It is only the second time in bond history that a company has used such a structure. Last year, Italian energy company Enel issued the first ever bond featuring a coupon increase (also 25bps) in the event of not meeting a sustainability performance target.

Suzano’s official rationale for using a similar structure is to reduce greenhouse gas (GHG) emissions intensity as “a key strategy...

Today’s headlines have been dominated by the news that Japanese prime minister Shinzo Abe has announced his resignation due to health reasons. While markets seem somewhat spooked by this, there’s reason to see this as a good entry point into Japanese assets rather than a reason to run away.

Abe’s health has been a topic in the news for some time now. I would argue that his stepping down on his own terms is less destructive than were it to happen as part of an unexpected political shake-up. In response to the announcement, we’re seeing Japanese equity markets down, the JGB (Japanese Government Bond) curve steepening and the Yen up slightly against both the Euro and the Dollar. To me, this seems like a good entry point for a number of reasons. The JGB curve has been steep for some time now and it seems unlikely that the Bank of Japan (BOJ) would tolerate a sharp deviation from their yield targets for too long. As of this week, they have also vowed to retain their...

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When Ken Ofori-Att – the Ghanaian finance minister – presented mid-year budget revisions, he highlighted the huge challenges of the pandemic. The Ghanaian response to COVID-19 has been quick, well organised and aimed at stopping economic weakness becoming a depression. But the rescue is coming at a large financial cost to the country. The fiscal deficit is forecast to be around 11% of GDP in 2020, while economic growth is expected to slump to 0.9% from a stellar average of 6.8% over the past three years.

While advanced economies and emerging markets with deep domestic debt markets have raised cheap money, many frontier economies have struggled. Like Ghana, they tend to rely more on external borrowing to finance their deficits. Some of this money comes at concessional interest rates from the IMF and multilateral development banks. But for larger volumes, frontier markets have tapped global debt markets. This does not come cheap, even as global investors have searched...

When Ken Ofori-Att – the Ghanaian finance minister – presented mid-year budget revisions, he highlighted the huge challenges of the pandemic. The Ghanaian response to COVID-19 has been quick, well organised and aimed at stopping economic weakness becoming a depression. But the rescue is coming at a large financial cost to the country. The fiscal deficit is forecast to be around 11% of GDP in 2020, while economic growth is expected to slump to 0.9% from a stellar average of 6.8% over the past three years.

While advanced economies and emerging markets with deep domestic debt markets have raised cheap money, many frontier economies have struggled. Like Ghana, they tend to rely more on external borrowing to finance their deficits. Some of this money comes at concessional interest rates from the IMF and multilateral development banks. But for larger volumes, frontier markets have tapped global debt markets. This does not come cheap, even as global investors have searched...

An unprecedented eviction crisis will soon hit the U.S. 

On Friday, the federal moratorium on evictions in properties with federally backed mortgages and for tenants who receive government-assisted housing expired. The Urban Institute estimated that provision covered nearly 30% of the country's rental units.

Covid-19 has taken lives, dramatically reshaped the way we live and work, and challenged our view of a safe and stable world. Those of us who work in investment management, especially high yield fund managers like myself, have seen the pandemic put many businesses under severe financial stress. British high-end sports car maker McLaren was one of them. The company’s activities have been badly disrupted and the company’s liquidity came under extreme pressure. It urgently needed to raise hundreds of millions of pounds of cash, despite having recently launched a strategic cost cutting and capex reduction plan.

One common theme in market commentary of late has been the unprecedented use of the word unprecedented! One thing that used to be unprecedented and is now commonplace is central banks buying corporate bonds. Now this seems to have become conventional monetary policy, it is worth asking “why?” and “is this appropriate?”.

The COVID-19-induced slowdown of the past few months has been different from past crises for a number of reasons. One of the most significant differences has been the greater ability of emerging market central banks to provide support to their economies, as we wrote about a few weeks ago. An interesting example is that of Indonesia. Last week, Indonesia’s central bank (Bank Indonesia – “BI”) cut its main interest rate (its seven day repo rate) by 25bps, from 4.25% to 4%. This was the second consecutive 25 bps rate cut in two months, the fourth this year, and brings Indonesia’s interest rates more in line with its Asian peers. Like many other central banks, BI has had to perform a delicate balancing act between supporting the economy during the pandemic and maintaining investor confidence and a stable currency. Indeed, given 40% of total corporate and government Indonesian debt is denominated in foreign currency, ensuring a stable rupiah is critical to the country’s economic...